H2 Economics Flashcards

What is the Lorenz curve used to measure?

Answer: Income inequality within a country

The Lorenz curve plots the cumulative share of income earned against the cumulative share of population. The further the curve from the 45° line, the greater the income inequality.

What is 'structural unemployment'?

Answer: Unemployment arising from a mismatch between workers' skills and the skills demanded by employers

Structural unemployment occurs when there is a mismatch between workers' skills and job requirements, often caused by industrial change, technological advances, or regional shifts in employment.

What is the difference between regressive and progressive taxation?

Answer: Progressive tax takes a higher percentage from higher incomes; regressive tax takes a higher percentage from lower incomes

A progressive tax (e.g., income tax with rising rates) takes a larger percentage of income from higher earners. A regressive tax (e.g., GST) takes a larger percentage from lower income earners relative to their income.

How does depreciation of the Singapore dollar affect its export competitiveness?

Answer: Singapore exports become cheaper in foreign currency, improving competitiveness

When SGD depreciates, Singapore's exports cost less in foreign currency, making them more price-competitive internationally. Imports become more expensive, potentially worsening the trade balance if demand is inelastic.

What is 'moral hazard' in economics?

Answer: When one party takes more risks because another party bears the cost or consequences

Moral hazard occurs when one party takes on more risk because the costs of that risk are borne by another party — e.g., insured people taking less care because insurance covers losses.

What is Singapore's approach to managing its economy, described as 'pragmatic'?

Answer: A mixture of market forces with strategic state intervention in key sectors, guided by what works

Singapore's economic pragmatism involves allowing market forces to operate while the government strategically intervenes in sectors critical to national development — using GLCs, the CPF, and active industrial policy.